Office Depot Parent ODP Boosts FY24 EPS Outlook Despite Bumpy Q1 Ride: Details

The ODP Corporation ODP shares are trading lower after the company reported first-quarter FY24 earnings below street view.

The company reported a first-quarter FY24 sales decline of 11% year-on-year to $1.87 billion, missing the analyst consensus estimate of $1.96 billion.

The decrease in reported sales is largely related to lower sales in its Office Depot Division, primarily due to 56 fewer retail locations in service compared to the previous year and reduced transactions.

Gross profit increased 14.7% to $410 million with a margin of 21.9%. Selling, general and administrative expenses dropped 6% to $359 million.

The operating income for the quarter plunged 81% to $18 million and the operating margin contracted 350 basis points to about 1%.

Adjusted EBITDA for the quarter decreased 37% to $82 million. Adjusted EPS of $1.05 missed the consensus estimate of $1.67.

Operating cash flow for the quarter totaled $38 million with a free cash flow of $3 million. ODP repurchased 957 thousand shares at a cost of $50 million in the first quarter of 2024.

The company held $282 million in cash and equivalents as of March 30. Total debt was $125 million.

“During the quarter, more cautious spending activity and ongoing delays in the onboarding of new customers at ODP Business Solutions impacted their performance, while reduced consumer activity affected Office Depot’s revenue results,” said CEO Gerry Smith.

“Additionally, we have arrived at the strategic decision to pursue a sale of Varis, which our Board of Directors have approved. Concurrently, we have reduced the operating cost of Varis to further refine their focus, while continuing to support new and existing customers. Through the acceleration of Project Core, the additional cost efficiencies we are driving now and in the second half of the year have positioned us to increase guidance for adjusted EBITDA and adjusted EPS,” Smith continued.

Outlook: The company updated its guidance for 2024, with sales affirmed at the lower end of the prior outlook for decline of 2% – 5%. 

ODP raised its Adjusted EPS outlook from $5.60 – $5.80 to $6.30 – $6.60  against the consensus of $5.67.

Price Action: ODP shares are trading lower by 5.59% at $49.00 in premarket on the last check Wednesday.

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